Fortune - 04.2020

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$3.5 billion

2009

SOURCES: S&P GLOBAL, BLOOMBERG

2019

FITNESS

2011 2013 2015 2017

GARMIN ANNUAL REVENUES

27. 9 %

44 FORTUNE APRIL 2020

company. “He literally knew my wife

and kids’ names,” says Rick Evans,

who worked for Garmin from 2000

to 2016. “And he knew that about

everybody.”

Such tightness would come in

handy when times got tough in the

late 2000s. The company was soar-

ing in 2007, when it had some 40

different in-car GPS models for cars,

trucks, and motorcycles. The automo-

tive segment had become a $2.3 bil-

lion business, more than doubling its

revenue from the previous year and

representing nearly 74% of overall

sales. Then came the iPhone, which

Apple released in the middle of that

year with Google Maps loaded on

all phones. The first version of the

iPhone lacked a GPS chip, relying

covered Garmin for 15 years.

Kao, who remains Garmin’s execu-

tive chairman and was CEO at the

time, kept calm and focused invest-

ments on the nonautomotive parts

of the company’s business. Over the

next decade, for example, Garmin

bought more than 25 companies

around the world, mostly distribu-

tors of navigation equipment that

broadened its geographic reach.

It also bought access to weather

information as well as contactless

payments technology it would embed

in its wearable devices. Pemble, the

CEO, says Garmin never lost sight of

the need to grow. “The most efficient

thing to try is to double down on

growth and opportunity,” he says.

“Saving money and cutting expenses

never really works.”

Garmin’s product innovation was

hardly flawless. In 2008 it debuted

the Nüvifone, its own GPS-enabled

smartphone that eventually used

Google’s Android mobile operating

system. Expensive for its day at $300

retail, the phone had a touch screen

that wasn’t very responsive and often

confused swiping and tapping. Its

camera was low-quality and didn’t

include video. And Garmin charged

users $6 to check the weather, traffic,

and local events—things Apple and

other phonemakers offered for free.

The company exited the smartphone

business after two and a half years.

G

ARMIN PROVED TO BE at its

best when it plodded along

at product development, the

antithesis of Silicon Valley’s

mantra of moving fast and

breaking things. It helped that the

company made products for regu-

lated industries, particularly aviation,

where precision is more important

than time-to-market. “I had worked

for Apple and seen how quickly they

could move,” says Matt Ronge, a for-

instead on more rudimentary technol-

ogy to pinpoint locations. But within a

year, Apple incorporated GPS, making

its phone a multifaceted replacement

for Garmin’s stand-alone devices.

Garmin’s business took an almost

immediate hit, and its problems were

exacerbated by the financial crisis.

In 2008, the stock price collapsed,

falling below $16 a share from highs

of more than $120 in 2007. As Wall

Street had feared, revenue declined

by $500 million in 2009, to $3 bil-

lion. Though Garmin remained sol-

idly profitable—it earned $704 mil-

lion that year—investors were rattled.

“Back then, [investors] would come

in and say, ‘They’re going to get put

out of business,’ ” says Ron Epstein,

a Bank of America analyst who has

“The biggest challenge is getting that mass market to understand w

TRADING PLACES

As Garmin’s automotive business, the in-car navigation gadgets that made the

company a household name, has dwindled, fitness watches and trackers have

picked up the slack.

GAR.W.0420.XMIT.indd 44 FINAL 3/10/2020 1:28:27 PM